Yandex Moves Into Russian E-Commerce to Expand Beyond Web Search

Yandex NV (YNDX), Russia’s largest search engine which gets 99 percent of its sales from Web advertising, is expanding in the country’s fast-growing online retail market with a business model mimicking Amazon.com Inc. (AMZN)

The company is turning its Yandex.Market service, which 19 million Russians use to search for goods offered online, into a full-scale shopping site, project manager Alexey Avdey said today at a conference in Moscow. Users will be able to purchase goods through the Yandex service, and the company will arrange delivery through its Multiship unit.

Yandex is expanding into the turf of Russian online retailers such as Ozon.ru and Lamoda as growth in advertising revenue slows. The Russian e-commerce market grew 28 percent last year to the equivalent of $16.3 billion and is set to surge 33 percent this year, helped by digital goods and ticket sales, according to Moscow-based researcher Data Insight.

Yandex will work with about 40,000 online stores, betting that its service will simplify payments and delivery. Russia’s postal service is widely considered unreliable, a potential hurdle for anyone starting a Web shopping business. Yandex, a well-known brand in Russia, will guarantee delivery or refund payment, Avdey said.

The company will charge 1 percent for each order plus 2 percent for payment processing. Users will be able to pay for goods with bank cards or the Yandex.Money e-wallet. Yandex bought delivery-services aggregator Multiship in January.

Europe’s Biggest

Russia has Europe’s largest Internet audience, with about 67 million Web users in March, according to researcher ComScore. Of Russian Internet users, 71 percent make at least one online purchase a year, according to TNS Web Index.

Yandex, which is based in Amsterdam and has its main offices in Moscow, is forecasting its revenue growth to slow to 25 percent to 30 percent this year, after sales increased 37 percent to the equivalent of $1.2 billion last year. Yandex dominates Russian Web searches with 62 percent of the market in the first quarter, compared with global leader Google Inc. (GOOG)’s 27 percent, according to Moscow-based researcher LiveInternet.ru.

Shares of Yandex have declined 24 percent in New York this year. They added 1.8 percent to $32.98 yesterday.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net Ville Heiskanen, Torrey Clark

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